Rather than push on embedding Python in XAML, which Chris has made fine progress on anyway, I changed tack and quickly got Python code behind working.  Separating code and markup is considered best practice anyhow...and the implementation was trivial.  So for example, I can now do this:

<Button Name="Button1_Copy1" Content="Button1" Grid.Column="1"

Pythalon:PythonScript.Import="CodeBehind.py">

Given the code behind approach, I am re-working Pythalon so I can load and save Xaml and Python files, and use the interactive console to experiment and test my creations.  This involves a bit of infrastructure:  Document and View classes for example, and a new UI.  I've got a few things working, and a bunch of new ideas.